Forex spread trading dubai legal
In a recent judgment by the Dubai Court of Appeal No. The agreement between the parties involved speculation on movements in international share and stock prices. The Forex spread trading dubai legal would speculate on one of the markets concerned closing at a certain level and, if that figure or sum were achieved, the Claimant would pay the Defendant an amount based on the formula set out in the agreement.
If the figure or sum was not achieved i. It was argued by the Claimant that the contract was a commission-based agency contract, because it related to assets stocks, shares and currencies being traded, it was not a contract for gambling. The Court of Appeal however held that there was no proof of shares or securities being traded between the parties, it was strictly a case of spread betting where predictions were made on the prices of shares and stocks that were not acquired by or transferred to either party.
Since betting is prohibited under UAE Law Article of the UAE Forex spread trading dubai legal Codebeing a contracts of hazard ghararthe subject matter of a spread betting contract is unlawful and renders the contract void for contravening public policy and morals.
The Claimant was therefore unable to recover the debt that accrued under the spread betting contract. The Defendant entered into an agreement and opened an online trading account with the Claimant. The dealings between the parties involved speculation on movements in international share and stock prices where one of the parties speculates on one of the markets concerned closing at a certain level and, if that figure or sum is achieved, the other party pays the speculator an amount based on the formula set out in the agreement.
Forex spread trading dubai legal the figure or sum is not achieved i. The Defendant argued that the nature of the agreement was not an agency which requires at least three parties.
Such a contract is an explicit form of gambling forbidden under Islamic Law. The Court of First Instance appointed an accounts forex spread trading dubai legal who concluded in his report that the Defendant had opened forex spread trading dubai legal account with the Claimant with a password to perform online transactions and trades that allowed him to speculate on price movements. The expert established from an accounting standpoint that the Defendant engaged in betting activity forex spread trading dubai legal on price movements through the account in question.
Both parties exchanged comments on the expert report with both parties objecting to the report. Both parties requested that the original expert be reappointed to undertake the following:.
The Defendant sought dismissal of the action on public policy grounds Articles of the Civil Code. It was argued that the transaction was a type of gambling and requested that an Islamic finance expert be appointed to determine the nature of the contract and whether such activity spread betting was permissible under Islamic law or prohibited under Articles — of the Civil Code.
The Defendant also submitted documents obtained forex spread trading dubai legal the UK confirming that this type of transaction would forex spread trading dubai legal be regulated by the rules of the Financial Services Authority FSA. These transactions are regulated by the UK Gambling Commission and any complaints relating to this type of transaction are referred to the Betting Adjudication Service.
The Defendant also highlighted that the Claimant described the activity as spread betting on its website as follows:. With a spread bet, you can speculate on price movements on both rising and falling markets.
For example, you may know that a company is about to release quarterly results and have an opinion on whether the figures will have a negative or positive affect on its share price.
Based on that opinion, you can place a spread bet to go long buy or go short sell the company share price and take advantage of any price moves. A request for the reappointment of the expert was made in order to consider issues such as: The expert added that neither party had provided him with proof of share or securities trading between the parties and forex spread trading dubai legal it was strictly a case of spread betting where predictions are made on the prices of shares and stocks that are not acquired by or transferred to either party.
The Court of Appeal ruled that if the subject matter of an obligation is a thing, that thing must exist or be able to exist at the time of creation of the obligation. If the subject matter of an obligation is an act or omission, it must be possible.
And if the subject matter of an obligation in either case is impossible then no obligation shall arise and the contract is void. The subject matter of an obligation must be certain or capable of being rendered certain. The subject matter of an obligation must also be capable of being disposed of. That might not be the case due to its nature for example, sun, air or its designated purpose such as property with a particular public interest.
That would also not be forex spread trading dubai legal case if disposing of the thing is unlawful either by operation of law or on public policy or morality grounds. If the subject matter is inherently capable of being disposed of but the contract is forex spread trading dubai legal for an objective contrary to public policy or morality, then as long as the other side is aware of such objective the contract would be void, not because the subject matter is unlawful but because its objective is unlawful for public policy or morality considerations.
In this case, the transaction is void because the objective is unlawful rather than the subject matter. Accordingly the contract is invalid on the basis of UAE Public policy grounds. This judgment highlights that spread betting is prohibited in the UAE and is against public policy. Forex spread trading dubai legal court will ultimately examine and discover the nature of the activity even if it is not inherently clear or described as something else. If determined to be a form of gambling, the contract will be deemed null and void and any debts that arise from these transactions are not recoverable.
The criterion for the validity of a contract is that it must be made over a lawful subject matter, and it must have a valid and existing lawful purpose. If one of these essential pillars is not established, then the contract will be void and the judge may so rule of his own motion. Such a contract will not have any effect, nor may it be ratified, and any person concerned may rely on it being void.
Contracts involving speculation risk being deemed a form of gambling and being found void. The question was whether this was a contract for spread betting or not. Background Facts The Defendant entered into an agreement and opened an online trading account with the Claimant.
Expert Report The Court of First Instance forex spread trading dubai legal an accounts forex spread trading dubai legal who concluded in his report that the Defendant had opened an account with the Claimant with a password to perform online transactions and trades that allowed him to speculate on price movements.
Both parties requested that the original expert be reappointed to undertake the following: Provide the Court of First Instance with a detailed explanation of the nature of the transaction; and Determine whether any assets shares, stocks were traded between the parties or whether it was only a matter of forex spread trading dubai legal, prediction, and speculation without the transfer of any assets. The Defendant also highlighted that the Claimant described the activity as spread betting on its website as follows: Comment This judgment highlights that spread betting is prohibited in the UAE and is against public policy.
For a company that has built its foundations on financial forex spread trading dubai legal betting, establishing an office in Dubai is hardly the most obvious destination. IG Group started out in offering spread betting — a type of speculation that involves taking a bet on the price movement of a security — and it was the only product it offered up untilwhen the company branched into contracts for difference.
Contracts for difference is the second biggest. All the forex spread trading dubai legal that are papered to this business contract with IG Limited which is registered at this office. Quite a lot of FX. The company actually got its licence from the DFSA a forex spread trading dubai legal of months ago, but held off launching it forex spread trading dubai legal to Ramadan. Hetherington also believes forex spread trading dubai legal contracts for differences CFDs will, in time, become a strong part of its business in Dubai.
CFDs are a leveraged product, which means you only have to put down a small deposit for a much larger market exposure. The leverage comes with significant benefits and risks: You want to trade on that and you believe that oil is going to go higher.
You would buy an amount per point — and the per point is two digits on — so Hetherington says there were fundamental issues in the way the CFDs were used in that case, which ultimately gave the derivative a bad name. The other problem in Ireland was that bank stocks were being pledged as collateral for CFDs in the self-same banks.
Holding collateral against the same name that you want to trade. That it is a disaster and we just do not allow it. We have never allowed it. He insists that CFDs are not for stake building. The problem is the products that we tend to trade off the back of are generally futures contracts or stocks where you can borrow and go short. IG offered some clients varying discounts on debts incurred, and several months later, there are still 80 clients out of still having debts outstanding or are in dispute with IG, according forex spread trading dubai legal recent media reports.
We were definitely hit by the Swiss franc — not to the extent that companies went bust or had to be recapitalised, but it definitely served as a wake-up call and it made us realise the danger of things which are pegged, manipulated, held in the wrong place, any variation of a theme of where a market is not able to auto correct and self-adjust. Hetherington says IG — in keeping with its business model — will never advise clients on where to invest. Lots of firms will advise you, some will implicitly advise you.
We will help you to trade well, support and give information about products. Hetherington, however, hopes to see it grow like its Singapore office. There are five million people in Singapore and those people actually trade so much more. Their accounts are valuable and their propensity to trade is very high. It ends up that Singapore is more valuable to us than Germany with 80 million forex spread trading dubai legal in it.
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